Question 1

The amount that a nation trades with others is determined by:

Accepted Answer

Geography and availability of natural sea ports can influence a nation's trade, but government policy can also have a significant impact on the amount of trade. For example, governments can impose tariffs or restrictions on imports, or offer incentives for exporting certain goods. Therefore, all three factors can determine a nation's trading activity.

Question 2

A capital investment that is owned and operated by a foreign entity is called:

Accepted Answer

Foreign direct investment refers to a capital investment made by a foreign entity in a company, whereby the foreign entity owns and operates the investment.

Question 3

The production function is given as Y = AF(L, K, H, N), where Y is the quantity of output, A is the level of available production technology, L is the quantity of labour, H is the quantity of human capital and N is the quantity of natural resources. This equation provides:

Accepted Answer

The answer of The production function is given as Y...

Question 4

Reducing the rate of population growth is widely thought to:

Accepted Answer

Reducing the rate of population growth can help less developed countries raise their standard of living because it reduces the strain on limited resources and allows for more investment in education and healthcare. With a slower population growth, the government can provide more services to each citizen, leading to an overall improvement in living conditions.

Question 5

Although technological knowledge and human capital are closely related, there is an important difference. Which of the following statements is correct?

Accepted Answer

Technological knowledge refers to society's collective understanding of how the world operates, including scientific and engineering principles that can be applied to create goods and services. Human capital, on the other hand, encompasses the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country. The resources spent on education, training, and health to improve this human capital involve transmitting technological and other forms of knowledge to the labor force, making option C the correct statement.

Question 6

While Africa should have grown faster than other developing areas because of its relatively low income per head, it has grown more slowly. This was because some of its countries had policies of:

Accepted Answer

Higher trade barriers hindered trade and economic growth, while low tax rates and excessive saving rates can actually promote economic growth. Therefore, only choice A directly supports the idea that Africa's slower growth was due to policy choices.

Question 7

Human capital is:

Accepted Answer

Human capital refers to the knowledge and skills that workers acquire through education, training and experience, which enable them to produce goods and services. It is an important determinant of economic growth and development, as it improves labor productivity and innovation capabilities. A and B refer to physical capital or natural resources, respectively, while D refers to technological knowledge, which is only one component of human capital.

Question 8

The catch-up effect is the idea that:

Accepted Answer

The catch-up effect suggests that countries that start out relatively poor are more likely to grow at a faster rate than countries that start out already wealthy. This is because they have more opportunities for growth and development, such as investment in infrastructure, labor, and technology. As they catch up to the more developed countries, their growth may slow down due to diminishing returns on investment, but they may still have a higher overall growth rate in the long run. The other options do not fully capture the essence of the catch-up effect.

Question 9

The term constant returns to scale refers to:

Accepted Answer

Constant returns to scale is a situation where increasing all inputs by a certain proportion results in the output increasing by the same proportion. In other words, if all inputs are doubled, the output will also double. Therefore, option D is correct.

Question 10

An externality:

Accepted Answer

An externality is an effect of one person's actions on the wellbeing of a bystander, which can be either positive or negative. Option A is incorrect because an externality can be negative as well. Option C is incorrect because it refers to the external forces that increase the growth of GDP in a country, which is not the same as an externality. Option D is incorrect because it suggests that none of the statements are correct, whereas option B is correct.

Question 11

If Ernest Rutherford died and left $8000 to be invested for a period of 100 years to benefit medical students and scientific research, how often would this money double if it were to earn 5 per cent per year for all years?

Accepted Answer

The Rule of 72 is a simple way to estimate how long an investment will take to double at a fixed annual rate of interest. By dividing 72 by the annual interest rate (5%), we find that the investment will double approximately every 14.4 years.

Question 12

Technological knowledge refers to:

Accepted Answer

Technological knowledge specifically refers to understanding the best methods to produce goods and services, distinguishing it from human capital or physical capital.

Question 13

Countries that devote a small share of GDP to investment, such as New Zealand, tend to have:

Accepted Answer

Countries that devote a small share of GDP to investment tend to have low growth rates. Investment plays a crucial role in economic growth by increasing the capacity of a country to produce goods and services. Without adequate investment, a country may not have the resources to expand its output, leading to a lower growth rate.

Question 14

The word productivity refers to:

Accepted Answer

Productivity is typically measured as the amount of goods or services that a worker can produce for each hour of work, so option C is the best choice. While options A and B focus on individual worker output, productivity is typically discussed in a broader context such as at the level of a nation, making option D too broad.

Question 15

The growth of real GDP is:

Accepted Answer

The growth of real GDP is a good gauge of economic progress because it measures the increase in the value of goods and services produced in a country, which indicates that the economy is expanding and people are becoming better off. However, it is important to note that real GDP alone does not provide a complete picture of economic well-being, as it does not account for factors such as income inequality, environmental sustainability, or the distribution of wealth.

Question 16

Which of the following would not be considered physical capital?
Which of the following would not be considered physical capital?

Accepted Answer

Physical capital refers to tangible assets used in the production process such as buildings, machinery, and equipment. On-the-job training, although important for human capital development, is not a physical asset and therefore not considered physical capital.

Question 17

IIn the long run, a higher savings rate leads to:

Accepted Answer

A higher savings rate leads to more funds available for investment, which can result in higher levels of productivity and ultimately higher levels of income. However, this does not necessarily lead to higher permanent growth rates in productivity and income. This is because there are other factors that impact permanent growth rates such as technological advancements, population growth, and government policies. Therefore, while a higher savings rate can lead to short-term gains in productivity and income, sustained long-term growth requires a combination of factors beyond just savings rate.

Question 18

Physical capital is:
Physical capital is:

Accepted Answer

Physical capital refers to the stock of equipment and structures that are used to produce goods and services. This can include factories, machines, tools, office buildings, and other tangible assets. It is important because it enables firms to increase their productivity and efficiency, which ultimately leads to higher economic growth and standards of living.

Question 19

A production function shows the relationship between:
A production function shows the relationship between:

Accepted Answer

A production function illustrates the relationship between the inputs used in production and the output generated from production. It allows firms to determine the most efficient combination of inputs to produce the desired level of output.

Question 20

Natural resources:
Natural resources:

Accepted Answer

Natural resources are inputs provided by nature, such as land, rivers and mineral deposits. Natural resources take two forms - renewable and non-renewable. Therefore, option D "all of the above" is the most appropriate choice.

Quiz 26: Production and Growth